Most U.S. stocks rise amid budget talks while Treasuries retreat

Most U.S. stocks gained, rebounding from a five-day slump, as investors weighed prospects for a last-minute budget deal to avoid tax increases and spending cuts scheduled to start tomorrow. Treasuries fell and natural gas led commodities lower.

The Standard & Poor’s 500 Index rose 0.3 percent to 1,406.14 at 12:13 p.m. in New York after losing as much as 0.3 percent earlier. More than two stocks gained for each that fell in the U.S. The Stoxx Europe 600 Index climbed 0.3 percent. Ten- year Treasury yields were up three basis point at 1.73 percent, still headed for the lowest-ever year-end close. The Japanese yen weakened, set for the biggest annual drop versus the dollar in seven years. Gold was poised for a 12th annual gain.

Senate Majority Leader Harry Reid said negotiators could reach an agreement today that would protect all but top earners from a tax increase at midnight. There is still no agreement and gaps between the two parties remain. Republicans and Democrats were narrowing the annual income level at which tax rates would increase in 2013 to between $400,000 and $500,000.

“The market is in this manic-depressive mood because of what’s going on in D.C.,” Wasif Latif, vice president of equity investments at USAA Investments in San Antonio, said by telephone. The firm oversees $54 billion. “The different ideas that they keep bouncing around and is there a deal or no deal -- it’s like a game show.”

More Battles

Even if a deal is reached and can get through both chambers of Congress, it would be more limited than President Barack Obama and leaders of both parties sought. It would set up another battle early in 2013 over the budget and the federal debt limit. Reid, a Nevada Democrat, yesterday rejected the latest Republican offer to resolve the deadlock as Minority Leader Mitch McConnell appealed to Vice President Joe Biden in an effort to break the impasse.

The S&P 500 is poised for a 12 percent gain this year while headed for a 0.7 percent drop in December. Financial shares jumped 25 percent this year while consumer, health-care and technology companies added at least 12 percent for the biggest gains among the main industries in the benchmark index. Utilities are down 4.7 percent for the only decline among the 10 groups.

Volume in S&P 500 stocks was 25 percent below the 30-day average at this time of the session, according to data compiled by Bloomberg, as trading slowed before the New Year’s holiday. Trading of U.S. Treasuries will stop at 2 p.m. New York time today and all markets will be shut worldwide tomorrow.